FLNG / LNG FSRU Terminals RISK and INSURANCE ISSUES 7 th July Paul Nicholson Marsh LNG Practice Leader LEG Construction Seminar, London

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1 FLNG / LNG FSRU Terminals RISK and INSURANCE ISSUES 7 th July 2015 Paul Nicholson Marsh LNG Practice Leader LEG Construction Seminar, London

2 Section 1 FLNG - LIQUEFACTION INDUSTRY OVERVIEW

3 FLNG Capacity requirements Small scale up to 1mMt/yr Up to USD 1bn Conversion/Mid scale up to 2mMt/yr Up to USD 1-3bn Large scale up to 4mMt/yr Up to USD 5-7bn Issues: Near shore or Sea based Technology Small scale versus Conventional technology Conversion versus New build FLNG Wells or Pipeline feed system Accumulation risk with sub sea and OEE Associated gas and LPG production? Oil company or Contractor scheme Cyclone risk War and Terrorism MARSH 07 July

4 FLNG Project Outlook 1 1 KPMG International Inc., September 2014 MARSH 3

5 FLNG Projects in EPC stage MARSH 07 July

6 Prelude - FLNG Unit Operations LIVING QUARTERS STEAM GENERATION FLARE ACUD GAS REMOVAL MEG REGENERATION UTILITIES LIQUEFACTION END FLASH, BOIL OFF & FUEL GAS LOADING ARMS AGRU ABSORPTION & MERCURY REMOVAL INLET FACILITIES PRODUCT STORAGE WITHIN THE HULL TURRET AND MOORING MARSH 5

7 Subsea Facilities Wellheads and Xmas trees Production control systems including dynamic / static umbilicals and associated systems Insulated corrosion resistant alloy flowlines Subsea structures including production and riser base manifolds Flexible risers and buoyancy modules MARSH 6

8 MARSH

9 Petronas 1 MARSH 07 July

10 Caribbean FLNG MARSH 07 July

11 Golar LNG ship conversions to FLNG MARSH 07 July

12 Section 2 FSRU INDUSTRY OVERVIEW MARSH 07 July

13 FSRU Industry overview 30 projects active worldwide for fast track LNG import: India Chile Brazil Indonesia Bahrain Benin Uruquay Bangladesh South Africa Jordan Puerto Rico Nambibia Ghana LNG companies matching up new markets to their portfolios MARSH 07 July

14 FRSU overview contd FSRU New builds or retrofits (lease schemes) Golar Hoegh Excelerate BW offshore Terminal owners Domestic gas companies Independent developers LNG players Capex FSRU new build USD275m USD350m FSRU marine terminal infrastructure USD80m USD400m MARSH 07 July

15 FSRU Schematic (Conversion) MARSH 07 July

16 FSRU - Insurance Solutions vary according to the nature of the project MARSH 07 July

17 FSRU - Insurance Solutions vary according to the nature of the project MARSH 07 July

18 Latest FSRU on stream Elengy / Excelerate Pakistan MARSH 07 July

19 Land attached FSRU terminal typical MARSH 07 July

20 Columbia FSRU Import Terminal Pipe on Trestles / Island Jetty MARSH 07 July

21 Chile FSRU Import scheme with Power plant MARSH 07 July

22 Section # FLNG - LIQUEFACTION RISK AND INSURANCE ISSUES MARSH 07 July

23 Key Insurance Risk Exposures FLNG construction Typical WELCAR physical damage risks akin to an FPSO build Liabilities Technology and scale-up? Catastrophic start-up operations exposure potentially includes loss of the FPSO, risers and mooring systems Cyclone potential clash with Australian waters? Subsea infrastructure installation! Typical WELCAR "SURF" risk exposures High pressure / high temperature wells Corrosion risks and material selection? Field development drilling and control of well exposures Initial operations risks MARSH 22

24 Design and Construction of FLNG a market position There is nothing being built on FLNGs that has not been proven before either on FPSO or onshore LNG applications Specific marinisation of LNG applications have been the subject of a very high level of technical assurance Yard fabrication Insurance loss history has been good in South Korea LNG industry has a very good Insurance loss experience Market focus sub sea installation of risers, flowlines and resistance of FPSO moorings to cyclones Contingency planning for modular and hull repair MARSH 07 July

25 FLNG Risk Mitigation Issues MARSH 07 July

26 Construction Insurance Risk Build-up MARSH 25

27 FLNG Risk Assessment VCE Damage models FLNG EML (Estimated Maximum Loss) Concept 0.70 bar BASE CASE LNG 0.35 bar 0.20 bar 0.10 bar 0.05 bar LNG Liquefaction LPG Frac. 10 Accommodation Gas Treating Gas Inlet 0 125m MARSH 07 July

28 FLNG Risk assessment Operational exposures (typical) Scenario Policy Value at risk ($mm) Total loss of large scale FLNG FPSO All Risks Property 5,000 Associated damage to gas risers All Risks Property 100 Loss of LNG and Condensate stock All Risks Property 40 Pollution caused by condensate spill Third party liability / P & I 25 Damage to adjacent moored LNG tanker (function of mooring and configuration) P & I Loss of life of crew P & I 50 Loss of Hire / Business Interruption (optional) Loss of Hire 60 / 600 Removal of wreck (Risk analysis based) P & I 300 MARSH 07 July

29 Section # FSRU Terminal schemes RISK AND INSURANCE ISSUES MARSH 07 July

30 Risks that can be insured MARSH 07 July

31 FSRU - Jetty & Breakwater Project Insurance Options ISSUE ONSHORE CAR WELCAR OFFSHORE CAR Premium Cost Faulty Part Coverage Stand-by Charge Coverage Lower Cost option but focus on wets works Coverage included to full value on piping and onshore LNG facilities Historically higher cost Coverage sublimited for all jetty work including trestles Sublimited for offshore fabrication vessels Wets works clause Yes but variations Nothing specific Normal Action of the Sea Coverage Excludes risk up to 1/20 year storm Included DSU Coverage Available DSU coverage becoming available MARSH 07 July

32 FSRU Terminals Risk mitigation issues Safety Design Design studies Jetty siting and marine studies Loading arm PERC Pipeline remote isolation, depressurization, and ESD Jetty fire and gas detection and CCTV Fixed protection Project Management PMT team strength EPC Contractor experience and track record HSE procedures QA/QC - Jetty pile load tests - Concrete pour tests - Pipe weld controls Operational readiness and PSSR Security MARSH 07 July

33 Jetty work MARSH 07 July

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